For the past few years, Brisbane has been on the radar of buyers’ agents and investors from elsewhere around the nation.
Long before the Sunshine State capital was named as the host city for the 2032 Olympic Games, there did seem to be some sort of mythical property investment halo hanging over it.
The thing was, some investors who bought into the market before the pandemic, may have wound up slightly underwhelmed by their results.
The reason for that was probably because they had (inaccurately) determined the entire region was offering real estate gold when that was never the case.
However, those investors who bought strategically back then, and continue to do so now, were giving themselves the best opportunity of secure superior results over the medium-term.
In fact, the clients who we helped purchase in Brisbane a few years ago have experienced huge equity gains.
Dwelling growth differences
There is no question that Brisbane is in the midst of a broad-based market boom that is likely to have sustained momentum, perhaps longer than southern cities will end up having.
However, in rising market conditions, it’s more important than ever to not throw a blanket golden ring around an entire city – and especially when it comes to dwelling type.
Brisbane experienced a significant oversupply of new units over recent years, which has created a chasm between the capital growth performance of different dwelling types.
According to the CoreLogic Home Value Index for July, the median house value in Brisbane has increased by an impressive 17.7 per cent over the past year.
Conversely, the median unit value has grown by only seven per cent over the same period – that is a massive disparity in capital growth results.
The significant difference in the performance of these two dwelling types is likely to remain that way for the foreseeable future in my opinion.
Why is that?
Well, it’s partly due to the fact that the River City is a place that remains dominated by houses rather than units.
Unlike larger cities such as Sydney and Melbourne, Brisbane simply doesn’t have the buyer demand to support high-density living, which is an unfortunate fact that many investors learned the hard way over the past five years or so.
There has also been a strong push by some investors into lower socio-economic areas using a supposed model of, “It worked in Sydney, so, it will work in Brisbane, too”.
Again, the Queensland capital just doesn’t have the population to support such thinking, with many of these areas set to remain tenant-heavy for some time to come because of the demographics of the people who can afford to live there – which is never a precursor to capital growth.
The truth of the matter is that not every Brisbane suburb is investment-grade.
Historical property price performance proves that it is location, including being close to the city or within a desirable catchment, such as by the river, that continues to put upward pressure on values in Brisbane.
Buying like a local
Another reason why some interstate property purchasers in Brisbane have not achieved stellar results is because they have not bought like a local.
Instead, they have pretty much just thrown their hat in the ring believing that everywhere was a solid bet, rather than understanding the peculiarities of a specific location.
What I mean by that, for example, is they failed to do the research to help them understand which parts of the city are prone to flooding – because they are plenty.
In fact, some sides of streets are more prone to flooding than others well, but most people will never have done enough due diligence to know that.
Likewise, interstate investors often don’t have the knowledge on whether a property is negatively impacted by main road noise, or the creation of major infrastructure that can drag down prices for some time to come.
Finally, investors from afar, probably don’t know which suburbs in their own city are saturated with public housing, let alone in another location that they may have only visited once or twice.
There is no question that parts of Brisbane do have the opportunity to provide real estate gold.
But there are just as many areas that are likely to leave investors finishing in last place when it comes to the potential for capital growth.